NEW YORK- The yen jumped to a six-week high against the dollar on Friday after faster-than-expected inflation in Tokyo supported bets for a Bank of Japan interest rate hike next month.
Tokyo’s core consumer price index, which excludes volatile fresh food costs, rose 2.2 percent year-on-year in November from a year earlier, up from 1.8 percent last month and beating forecasts for a 2.1 percent gain.
“The yen is turning into the latest momentum trade … with little friction to prevent it rising in thin holiday trade,” said Matt Simpson, senior market analyst at City Index.
Trading volumes declined heading into the US Thanksgiving holiday on Thursday, with many traders still out on Friday.
The dollar was last down 1.27 percent at 149.62 yen and earlier dipped to 149.47 yen, the lowest since Oct. 21. It is set for a 3.38 percent weekly loss against the Japanese currency, the largest since July.
The dollar index fell 0.31 percent to 105.74, after earlier reaching 105.61, the lowest since Nov. 12.
It is on track for a 1.78 percent rise in November as investors adjust for the likelihood that the new US administration under Donald Trump next year will loosen business regulations and enact other policies that boost growth.
Analysts also say that proposed new tariffs and a promised clampdown on illegal immigration could reignite inflation.
Stronger-than-expected economic data has also boosted bets that the Federal Reserve will slow its pace of interest rate cuts as it approaches the neutral rate. Traders are pricing in 66 percent odds for a 25 basis point cut at the Fed’s Dec. 17-18 meeting, but only a 17 percent chance of an additional reduction in January, according to the CME Group’s FedWatch Tool.
